Delivra Health Brands Inc. (3F0.F) Earnings Call Transcript & Summary

Good morning, and welcome to the Delivra Health Brands Inc. Year--End Fiscal 2025 Results Conference Call. [Operator Instructions]. The conference is being recorded. Presenting on today's call will be Gord Davey, President and CEO; and Jack Tasse, CFO. [Operator Instructions]. The information communicated by Delivra Health Brands, Inc., the company, is intended solely for discussion purposes and are not intended as and do not constitute an offer to, sell or a solicitation of an offer to buy any security and should not be relied upon by you in evaluating the merits of investing in any securities. The company believes the information communicated in this overview to be reliable, but makes no warranty or representation, whether expressed or implied and assumes no legal liability for the accuracy, completeness or usefulness of any information disclosed. Any estimates, investment strategies and view expressed during this conference call are based upon current market conditions and/or data and information provided by unaffiliated third parties and is subject to change without notice. All forward-looking information provided during this conference call are given as of the date hereof and are based upon opinions and estimates of management and information available to management as of the date hereof. Except as required by law, the company disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, events or otherwise. I would now like to turn the conference over to Gord Davey President and CEO of Delivra Health Brands, Inc. Mr. Davey, please proceed.

Thank you. Why should you be excited about Delivra Health Brands? Good morning, everyone, and thank you for joining us. My name is Gord Davey. I'm the President and CEO of Delivra Health Brands. And I'm proud to be leading this company at such a pivotal and exciting stage of its evolution. As we reflect on fiscal 2025, one thing is clear. Delivra Health Brands is winning. We've built a profitable, disciplined business with high-margin brands, expanding distribution and strong consumer loyalty. We're not a turnaround story anymore. We're a growth story. And the progress we've made has set the stage for what we believe will be an exceptional next phase for our shareholders. Let's start with the results. In fiscal 2025, we delivered an 8% year-over-year revenue growth. This is even while revamping our LivRelief Infused business unit. Our largest brand, Dream Water, in both Canada and U.S.A. has achieved double-digit growth across retail and e-commerce businesses. LivRelief Canada has delivered double-digit e-commerce growth as well. We've maintained a 51% gross margin and achieved positive adjusted EBITDA for the third consecutive year. We're still increasing investments in a while -- sorry, excuse me, while still increasing investments in marketing, sales and product innovation that will drive future growth. These aren't small wins. The proof that our strategy is working, our brands are resonating and our leadership team is delivering. Of course, growth doesn't come without challenges. We're reorganizing our LivRelief Infused route to market to build a more controlled and profitable business model. We're managing rising input costs, global instability and a competitive landscape that targets market leaders like us. But we view these challenges as opportunities, opportunities to strengthen our operations, improve our efficiencies and sharpen our competitive edge. Our brands are leaders in their categories and with leadership comes competition, that's a good sign. It means we're on the right track. We're tackling every challenge head on while keeping our focus on innovation, profitability and market share expansion. We have 5 key growth drivers that make Delivra Health Brands a strong investment. Let me walk you through the 5 major areas that make Delivra Health Brands such an attractive and scalable growth opportunity. Our first is that we're gaining strong traction with major retail and e-commerce partners across North America. Dream Water continues to expand with top convenience chains like Circle K, 7-Eleven and Casey's. We're expanding in the travel channel. We are in every airport in North America through Hudson News, Parity and WH Smith. We're in grocery channels like Loblaws and Sobeys, drug channels like Shoppers Drug Mart, Rexall, London Drugs and several online retailers, each delivering consistent double-digit growth. Our expansion plan includes large key club retailers, U.S.A. drug retailers and more large convenience retailers. LivRelief is also accelerating, adding new retail and digital partners. These high-volume accounts create recurring, predictable revenue that kind investors love to see. We talked to you about global expansion. We've established a solid foundation in North America and are now turning out with. Our early success in the Middle East has opened the door for broader international expansion into Latin America and Europe, where demand for natural wellness solutions continues to rise. This is a scalable asset-light growth opportunity that can multiply our global footprint without major capital investment. We have an innovation pipeline. Innovation is a major driver of shareholder value. Dream Water will soon launch new functional extensions focused on immunity, beauty and enhanced sleep formulations, while LivRelief continues to advance science-backed topical innovations for pain and wellness. These aren't just line extensions. They expand our consumer base and open new categories, positioning Delivra Health Brands for incremental revenue and margin growth. We're looking at strategic M&A opportunities. We're now in a position of strength to pursue selective accretive acquisitions while we're targeting profitable or near profitable wellness and better-for-you brands that align with our product focus and can benefit from our existing infrastructure. We have a proven operating model with strong margins. M&A provides a path to accelerate growth and scale our earnings power, creating direct value for our shareholders. We're going to look at expanded marketing and awareness. Brand equity drives long-term valuation, and we're investing smartly to build it. Campaigns like Shush Your Mind for Dream Water and Quiets Chronic Pain for LivRelief have strengthened consumer awareness and credibility. This coming year, we'll expand into new media, influencer channels and strategic partnerships, ensuring our brands remain visible, trusted and in demand. So why should you be excited to be a shareholder? Here's the bottom line. The Delivra Health Brand is financially disciplined, operationally strong and positioned for accelerated self-funded growth. We have a proven ability to generate profit, we have category-leading brands with room to scale. We're expanding our global and retail partnerships. We have a robust innovation and acquisition pipeline and a management team that knows how to execute. We've already delivered 3 straight years of positive adjusted EBITDA, maintained strong gross margins and built a platform that is now ready to grow exponentially without relying on external capital. So if you're a shareholder today, you should be proud of what you have. And if you're considering investing into Delivra Health, this is the right time because we're not only -- because we're only just beginning to unlock the full potential of our brands and markets. Delivra Health Brands is entering fiscal 2026 with momentum, confidence and a clear path to growth. We're focused on scaling our success, driving profitability and building lasting shareholder value. Thank you for your continued trust and support. I'll now turn things over to our Chief Financial Officer, Jack Tasse.

Thank you, Gord. This is Jack Tasse, CFO, Delivra Health Brands, and it is a great day here today at Delivra Health. And I would like to give a great big shout out to the team for delivering strong results for fiscal 2025. And at the same time, thank our shareholders for their continued commitment and support. Fiscal 2025 marks another successful year in terms of the growth of its top line with a compound annual growth rate of 13% over the past 4 years. And in some years, it is even higher. And the company is reporting its third consecutive year with positive EBITDA despite additional significant investments made in marketing programs and despite increasing cost pressures from manufacturing partners and supply chain and challenges in the Infused LivRelief channel. It is very important to highlight the significant improvement in the company's balance sheet, i.e., financial position and more specifically, its liquidity and working capital positions. The balance sheet status puts us in a position of strength, and this is the foundation of our future growth. For example, the company was able this year, fiscal 2025 to increase its inventory by more than 86%, which is roughly $1.3 million to support future growth without additional funding, and this supports our ability to take advantage of growth opportunities in the future. Here's a quick overview of the year-over-year progress of the company's main KPIs. The first one, which is to uncover potential in the U.S. and international markets for the company's Dream Water brand. The company grew its retail and international channels by 17% in the U.S., and this is driven by the introduction of new innovations such as immunity and gummies and additional distribution points in the airport travel channel as an example. This takes us to the second KPI, which is maintaining and growing gross profit and targeting a gross profit margin at 50% plus as an example, despite cost pressures driven by our manufacturing partners and despite unfavorable changes in the channel mix such as the Infused LivRelief channel, including the costing pressures by Amazon as an example, the company managed to maintain its margins and if not improve in certain channels such as the e-commerce channel, which delivered double-digit growth in Canada in both LivRelief and Dream Water brands, demonstrating operational discipline and resilience in the face of rising costs. This takes us to the third KPI, which is targeted improvement in adjusted EBITDA. This is the company's third year in reporting positive EBITDA, and the company is expecting better results in fiscal 2026, and this illustrates the strength of its business model and loyal customer or consumer base. The company could have reported more EBITDA in fiscal 2025 or year-over-year, but it is important to run the business on a long-term basis. So therefore, we need to invest in marketing programs and awareness programs, so on and so forth. The final KPI we mentioned on prior calls is scalability. And the company will continue its efforts in expanding its distribution points and seek opportunities with retailers, with strong retail presence. An example of that, the company has been focusing on the travel channel and was able to increase its distribution of its Dream Water across all airports in North America and the Middle East and we will apply similar strategies to new channels in North America and internationally as well. In conclusion, management is pleased to be delivering on its commitments and delighted of the strong foundation or financial foundation built over the past few years to support future growth. At the same time, we recognize our journey -- that our journey is far from over. We see significant opportunities ahead across all channels and remain focused on achieving new milestones and driving continued growth for Delivra Health. Thank you very much for listening. And with that, we will open the call for questions. Operator?

[Operator Instructions]. Since there are no questions, this concludes the question-and-answer session. I would like to turn the conference back over to Gord Davey for any closing remarks. Please go ahead.

Thank you, everyone, for taking the time to be here with us today. The future is bright for Delivra Health Brands, and we're ready to explode. Thank you very much, and have a great day.

This brings to a close of today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.